Billtrust index says rebound may be running out of steam

By ,
September 13, 2013 at 11:20 AM

An index that measures business-to-business purchasing stagnated the last three months, which has a local financial economist worried that those numbers will translate into a slowdown in the nation's gross domestic product.

The Billtrust B2B sales index, which tracks industry spending based on invoices collected by Billtrust, a Hamilton Township electronic billing company, posted an average of 100.3 for the last three months. That compares with an average of 100 at the end of May.

Arthur Ferri, a financial economist and consultant for Billtrust, said that's troubling, because the survey has posted steady growth on a month-by-month basis since its inception in May 2010.

"You had a sector that was growing, growing, growing — and all of the sudden, it stops growing," said Ferri, formerly an associate professor in the finance and economics division of Columbia Business School.

The index is based invoice data from industries including hardware, plumbing, heating equipment, electrical goods, building supply and other wholesale trades. Firms in the index are selected on the basis of low sales volatility.

Ferri added that June and July — posting a 100.06 and 98.85 — were the weakest two months in the index's approximately 40-month history, salvaged only by an improved August, which posted 101.9.

"Although the index rebounded in August, concerns remain for the U.S. economy post- November 2013, should the historical, leading correlation persist," Ferri said.

Ferri said trends are worrying because the index has been an relatively accurate predictor of GDP growth — posting a correlation of 0.77, with a correlation of 1 being the best — six months ahead. If current patterns hold up, Ferri said GDP will flatline around December.

Asked why the sudden slowdown, Ferri noted that many of the industries surveyed are connected to the health of residential and commercial construction markets, where growth has been tepid. "It could be very indicative of what is going on there," he said.

On average, each firm surveyed sends 11,000 invoices per month to 1,500 customers. The firms in the index generate aggregate invoice amounts of $17 billion annually.